Three years ago, when Google and its products were not quite so potent and ubiquitous, a reporter for the technology website CNET News did a quick experiment with the company's internet search tools. For half an hour she would find out as much personal information as possible about a revered Silicon Valley business executive. In a few dozen predictable clicks and keystrokes, she had his home address, his hobbies, the level of his wealth and his political affiliations. As a case study of how Google has eroded the privacy of even the most powerful it was a useful and justifiable exercise, especially as she did not include the most sensitive material in the story she wrote.

The executive did not see it like that. His corporation informed CNET that its use of "private information" had been highly inappropriate. As a punishment, the corporation would not speak to CNET reporters for a year. After a few weeks, the ban was quietly lifted, but among those who follow the computer industry the incident has not been forgotten, for one reason. The prickly executive involved was Eric Schmidt, the CEO and public face of Google.

This sharp-eyed book, written by a business professor who teaches in Silicon Valley and has been publishing volumes on related topics since the mid-90s, is full of such telling revelations about one of the world's most important companies. Despite the subtitle, this is not really a study of the social effects of Google's unprecedented attempt to "organise the world's information and make it universally accessible", as the firm's first press release put it in 1999. Instead, it is a restless examination of Google's strengths and weaknesses, and contradictions. Stross is not a hatchet man or a frustrated outsider: his thank-yous to Google staff from Schmidt downwards take up three paragraphs of the acknowledgments. But the company that emerges from this book is a more rickety and interesting enterprise than non-geeks might imagine.

For a start, Google is still quite small. At the end of 2007, despite almost a decade of feverish growth and handling two-thirds of all internet searches in the US, it had fewer than 17,000 employees, only twice as many as the London borough of Camden. Visiting the Googleplex, the company's main compound, Stross finds that "the signature buildings are not much bigger than those of a single suburban high school". Similarly, for all Google's proliferating, seemingly all-pervading desktop services, from Google Maps to Google Apps, from Google Book Search to Google Earth, from Gmail to YouTube, which it bought in 2006 for almost £1bn, Google still only has one business in the traditional, profit-driven sense: the selling of modest text-only advertisements next to its internet search results.

Stross describes lucidly how the company came up with and refined its search business. He points out that Google's ingenious strategy - making billions by matching ads to content it does not own - is reliant on much of the internet remaining an open, under-commercialised environment. "If even a small number of owners of [popular] websites were to exclude Google ... demanding, perhaps, that Google share revenue earned by indexing their sites ... then Google's ability to operate as it has would end," he writes.

The book also deals properly with the physical side of building a digital empire. Early on, Google chose as its hardware "a system cobbled together with inexpensive PC components" rather than more costly specialist equipment. This was a clever, counter-intuitive decision, the first of many. Google's racks of cheap servers could easily be expanded or others added. The company then set about placing them as close to its potential customers as possible. Stross explains: "As fast as electrons travel, physical distance still affects [online] response speed ... Reducing [it] by even a fraction of a second mattered to users, as Google discovered when it ran experiments to see if users noticed a difference between [a wait of] 0.9 seconds [and one of] 0.4 seconds ... Users were conspicuously more likely to grow bored and leave the Google site after waiting that interminable 0.9 seconds."

As quick and pragmatic as its customers, Google spent the early years of this decade securing premises across America for its servers: first in commercial spaces desperate for tenants after the 2001 dotcom crash, then in its own purpose-built "data centres". Such was the surging demand for its services, and the amount of power the company was consuming as a result, the first such facility was established in a town with its own hydro-electric power station.

Google's data centres function with almost no human intervention; their interiors are kept dark to save power, and research visits are not allowed. For some of Google's critics, these places are the perfect symbol of an enigmatic, over-mighty company. But Stross, for all his scepticism, does not see Google as a sinister monolith. Instead, he portrays it as an eccentric corporate environment, where teams of young Californians with PhDs work obsessively and autonomously, where grand company projects rise and fall, or are left half-completed, depending on the level of interest in the cubicles, and where an impatience to conquer the next digital frontier coexists with a deep conservatism that has kept Google wedded to the same basic internet search concept for 10 years.

Whether web users will remain satisfied for many more years with the long shaggy lists of online sources that Google offers them is a question, frustratingly, that Stross does not properly answer. He does outline the menace to the company posed by the highly successful social networking site Facebook, "a miniature web universe - behind a wall, inaccessible to Google". And he lists other threats. Google's copyright dispute with publishers over its desire to make all books electronically searchable remains unresolved. Google's ad revenue may shrink, and no longer be sufficient to subsidise all its other, more experimental activities. Like most of today's swaggering web businesses, Google may have come through the dotcom crash but it has never experienced a broader recession. Finally, there are the discouraging precedents offered by industry history. "No computer company," writes Stross, "has ever been able to enjoy pre-eminence that spans two successive technological eras."

This is a slightly dry book, the prose compact rather than elegant. But when so much of what is written about Silicon Valley and the web generally is still either self-servingly evangelical or sour and conspiratorial, agnostics about the whole enterprise have to find insight where they can. And Stross does include at least one rare piece of reassurance for journalists or fans of old media. According to him, Google News, the company's online attempt at sifting and presenting news stories by purely electronic means, has not been a great success. Its competitor Yahoo News gets three times as much traffic. The Yahoo site's secret? It is edited by humans.